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The underpricing of IPOs on the Stock Exchange of Mauritius

Ushad Subadar Agathee, Raja Vinesh Sannassee and Chris Brooks

Research in International Business and Finance, 2012, vol. 26, issue 2, 281-303

Abstract: This paper investigates the underpricing of IPOs on the Stock Exchange of Mauritius (SEM). Taking into account the whole population of firms which went public since the inception of the SEM until 2010, the results show an average degree of underpricing within the range 10–20%. Using a regression approach, we demonstrate that the aftermarket risk level and auditor's reputation both have a significant positive impact on initial returns. We propose the use of the Z-score as a composite measure of a firm's ex ante financial strength, and find that it has a significant negative effect on the degree of short-run underpricing.

Keywords: Initial public offerings; Underpricing; Ex ante uncertainty hypothesis; Underwriter reputation hypothesis; Stock Exchange of Mauritius (search for similar items in EconPapers)
Date: 2012
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